Oil Steadies as Chinese Trade Figures Offer Support

Brent crude futures steadied above $106 per barrel on Wednesday after China's total imports surged in March, suggesting the recovery in the world's second-biggest oil consumer is strengthening.

Chinese imports grew 14.1% in March, while exports grew 10%, relieving concern about the subdued import growth of previous months. Crude imports slipped 2.1% from a year ago, in line with market expectations.

"The trade numbers bode well for the global economy; the drop in crude imports doesn't really change the overall picture," Mitsubishi Corporation oil risk manager Tony Nunan said in Tokyo.

"The oil markets are struggling and looking for support, and this should keep them supported for now."

Geopolitical concerns also kept oil prices supported, especially simmering tension in Iran and North Korea.

Front month Brent futures added 5c to stand at $106.28 a barrel by 5.42am GMT, after posting their biggest gain since December in the previous session, helped by a weak dollar and tame Chinese inflation data.

US crude fell 39c to $93.81 a barrel after inventory data showed crude stockpiles rose by a larger than expected 5.1-million barrels, compared with analyst expectations of a 1.5-million barrel rise.

Brent could slip back to $105.38 a barrel after hitting resistance at $106.60, according to Reuters technical analyst Wang Tao.

Economic signals

Analysts said the accelerating restocking process in some industries and a favourable base effect from a year ago may have flattered China's March imports, which otherwise remain constrained by falling global commodity prices and a slower than expected upturn in investment demand.

Export growth in coming months may not be able to match the pace of January and February, even if the recovering global economy continues to bolster demand for goods from Chinese factories, they added.

The annual dip in crude imports didn't surprise the market as some state-run refineries started planned overhauls, and crude runs at independent refineries also declined on poor margins.

Chinese refineries processed close to 10-million barrels a day in the first two months of the year, a level just a touch off the record rate of 10.15-million barrels a day in December, as newly started refining facilities ran at high rates.

"We expect China's oil demand to go through a soft patch during this turnaround, before picking up again in the latter part of Q2," Sijin Cheng, an analyst at Barclays Capital, said in a report after the trade data was released.

The data mitigates some of the weak sentiment that has been plaguing the markets ever since the US labour department said on Friday that employers added 88,000 jobs outside farming, less than half the analyst forecast of a 200,000 increase.

"Oil futures are under some downward pressure and some of the recent economic data, such as US jobs, is indicating that the US economic recovery is still slow," Purvin & Gertz senior partner Victor Shum said in Singapore.

"Traders will continue to look for signals out of China to see if the growth momentum is intact."

One such signal came from China's inflation numbers on Tuesday, which showed a slower rate of price increase, allaying concern about policy tightening that could derail growth in the short term.

Diplomatic worries over Korea and Iran helped keep prices firm.

Tension in the Korean peninsula escalated after North Korea moved one long-range missile in readiness for a possible launch and South Korea said it has raised its surveillance.

Iran, which is engaged in a dispute with Western nations over its nuclear programme, said it had begun operations at two uranium mines and a milling plant after weekend talks to resolve the dispute ended in stalemate.